ENPH 116.16 (+2.74%)
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Last update on 2024-06-07

Enphase Energy (ENPH) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Enphase Energy (ENPH) undergoes Piotroski F-Score analysis for 2023, scoring 6/9. Discover financial health and performance insights.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 6

We're running Enphase Energy (ENPH) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Enphase Energy (ENPH) has a Piotroski F-Score of 6 out of 9, suggesting a moderate financial strength. The company has shown significant improvements in profitability and liquidity over the past few years. Positive aspects include a positive net income of $438.9 million and a positive cash flow from operations at $696.8 million in 2023, along with a rising gross margin and strong current ratio. However, the company has areas of concern, such as a declining Return on Assets (ROA) and Asset Turnover Ratio. The rise in outstanding shares is also a point of caution.

Insights for Value Investors Seeking Stable Income

Given Enphase Energy's strong profitability and liquidity despite some weaknesses in efficiency metrics and shareholder dilution, the stock appears to be a reasonably good investment. Investors should consider keeping an eye on operational efficiency and share dilution trends. Overall, the stock is worth looking into further, especially for those attracted to its solid cash flow and improving margins.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Enphase Energy (ENPH)

Company has a positive net income?

Evaluating the net income of a company involves assessing whether its profitability is positive or negative. A positive net income indicates profitability, while a negative net income indicates losses.

Historical Net Income of Enphase Energy (ENPH)

For Enphase Energy, the net income for the year 2023 is $438,936,000, which is positive, adding 1 point according to the Piotroski Analysis criteria. Analyzing the trajectory of the net income over the last 20 years, it's evident that the company has transitioned from a series of losses in the early 2000s to achieving sustained profitability from 2018 onward. Particularly striking is the rapid increase from $16,148,000 in 2019 to $438,936,000 in 2023. This trend suggests significant improvements in business operations, profitability, and overall financial health—adding to a positive sentiment for the stock.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) is a crucial metric for measuring the cash generated by a company's normal business operations. A positive CFO indicates healthy cash inflow from core activities.

Historical Operating Cash Flow of Enphase Energy (ENPH)

In 2023, Enphase Energy reported a CFO of $696,780,000, which is positive. This is a positive sign and earns 1 point in the Piotroski Score. Reviewing the trend over the past 20 years, Enphase Energy has experienced fluctuations in CFO, with several years of negative values, especially between 2008-2012 and 2014-2017. However, post-2018, the company has consistently maintained positive CFO, highlighting improved operational efficiency and profitability.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. It indicates how effectively a company uses its assets to generate profit.

Historical change in Return on Assets (ROA) of Enphase Energy (ENPH)

Enphase Energy's ROA decreased from 0.1539 in 2022 to 0.1357 in 2023, therefore it scores 0 points for this criterion. This decrease in ROA indicates less efficiency in generating profits from its assets compared to the previous year. Over the last 20 years, the industry median ROA has seen fluctuating trends, with a high of 0.2901 in 2010, and a recent rise to 0.2636 in 2023. Enphase's current ROA remains below this industry median, which could be a concerning indicator when compared to its peers.

Operating Cashflow are higher than Netincome?

Operating cash flow exceeding net income is indicative of a company's ability to generate ready cash flow that can cover net income, thus representing a robust liquidity position.

Historical accruals of Enphase Energy (ENPH)

For Enphase Energy (ENPH) in 2023, the operating cash flow is $696.78 million compared to a net income of $438.94 million. This results in a positive trend where the operating cash flow exceeds net income, earning the company a point for this criterion. Historically, ENPH has shown consistent improvements in cash flow from operations, particularly noticeable since 2019 when crosing into positive through 2023. such strengthened liquidity and generating real earnings from its operations highlight its financial health and ability to sustain earnings with real cash.

Liquidity of Enphase Energy (ENPH)

Leverage is declining?

Leverage assesses a company's use of debt to finance assets. A lower leverage ratio implies a more financially stable company as it relies less on debt.

Historical leverage of Enphase Energy (ENPH)

The leverage ratio of Enphase Energy (ENPH) showed a slight decrease from 0.3889 in 2022 to 0.3824 in 2023. Consequently, under the Piotroski criteria, this would add 1 point to its score. Examining the past 20 years, leverage fluctuated significantly, spiking notably in 2021 at 0.4577. However, the recent slight decline reflects a move towards more conservative financing, which is a positive indicator of financial health.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its current assets. A higher Current Ratio indicates stronger liquidity.

Historical Current Ratio of Enphase Energy (ENPH)

In 2023, Enphase Energy's Current Ratio increased to 4.5892 from 3.5478 in 2022. This increase is significant as it shows that the company has enhanced its short-term liquidity, thereby capable of meeting its short-term obligations more comfortably. This trend is favorable for investors and creditors as it indicates lower financial risk. Over the last 20 years, Enphase Energy's Current Ratio has generally been higher than the Industry Median, which further underscores its strong liquidity position. Specifically, the Industry Median Current Ratio in 2023 stands at 1.8298, which is substantially lower than Enphase's 4.5892. Thus, a one-point addition in favor of Enphase Energy for this criterion is justified.

Number of shares not diluted?

Change in shares outstanding measures how the number of shares available to the public has changed over a given period. A decreasing number of shares is typically positive, indicating share buybacks.

Historical outstanding shares of Enphase Energy (ENPH)

Outstanding Shares of Enphase Energy (ENPH) increased from 135,349,000 in 2022 to 136,376,000 in 2023. This trend reflects shareholder dilution rather than share buybacks. Historically, since its IPO, Enphase Energy has increased its shares from 5,000,000 in 2008 to today’s figure, maintaining a general trend of rising share numbers. Shareholders should monitor this progression, understanding its implications on earnings per share and ownership dilution, scoring this criterion 0.

Operating of Enphase Energy (ENPH)

Cross Margin is growing?

The gross margin is a fundamental measure of operational efficiency and profitability. It demonstrates how much of each dollar in revenue the company retains after incurring direct costs related to producing its goods and services.

Historical gross margin of Enphase Energy (ENPH)

Enphase Energy (ENPH) reported a gross margin of 0.462 in 2023, up from 0.4181 in 2022. This rise in gross margin indicates enhanced efficiency and cost management, aligning positively with investor expectations. Notably, this gross margin is substantially above the industry median of 0.2636 in 2023. Over the last two decades, the company has experienced fluctuating margins, falling below the industry median in some years but also experiencing remarkable growth periods, particularly since 2019 when the gross margin was 0.3544. Hence, for the Piotroski Analysis, we allocate one point due to the increase in gross margin.

Asset Turnover Ratio is growing?

Asset turnover measures how efficiently a company uses its assets to generate sales. An increasing asset turnover ratio implies more efficient use of assets.

Historical asset turnover ratio of Enphase Energy (ENPH)

According to the data, Enphase Energy's asset turnover ratio has decreased from 0.9028 in 2022 to 0.7084 in 2023. This lower level of asset turnover indicates a decline in the company’s efficiency with respect to generating revenue from its assets. Over the last 20 years, there has been a noticeable downtrend since 2013 when the asset turnover ratio was at 2.5582, the highest on record. This persistently falling trend is a negative signal, suggesting that the company's asset-utilization efficiency is continually degrading over time. Thus, for the year 2023, the asset turnover did not increase, resulting in 0 points.


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